MINORITIES ARE REFUSED MORTGAGES. BANKS WON'T LEND IN LOW-INCOME
NEIGHBORHOODS. IT'S CALLED REDLINING, AND IT'S STILL THRIVING IN
PHOENIX.

Federal data also show that the few minorities who actually applied for a home mortgage at Mellon in 1993 were six times more likely to be turned down than their white counterparts.

Mellon Mortgage Company's Phoenix office referred questions about the data to Margaret Cohen, a spokesperson at the company's corporate headquarters in Pittsburgh. Cohen said that Mellon is not a big player in the Phoenix market, and that the study's data ignore the performance of Mellon Mortgage's parent company, Mellon Bank. Mellon Bank either does no business in Phoenix or does less than one-half of 1 percent, the threshold for lenders listed in the study.

Cohen said that Mellon Mortgage does most of its business through mortgage brokers and therefore doesn't have a great deal of control over what prospective loans are brought to it. She said the company strives to be a fair lender in all the markets that it serves.

Mellon may be the most statistically egregious example of minority redlining in Phoenix, but it is hardly alone. In 1993, the Prudential Home Mortgage Company actually had a lower minority application rate than Mellon's--just 2 percent. Minority borrowers who did ask Prudential Home Mortgage for financing were turned down almost twice as often as whites.

The Prudential Home Mortgage Company's Phoenix office declined to comment on the study or its local minority and low-income lending practices.

Of the study's worst lenders in Phoenix, perhaps the one with the most to lose is the State Savings Bank in Scottsdale. As a bank (rather than a mortgage company), State Savings has a poor minority-lending record that could arouse the wrath of federal regulators if the institution attempts to merge with or buy another bank. Federal data show that in 1993, State Savings received only about 5 percent of its mortgage applications from minorities.

Unlike Prudential and Mellon, State approved minority applications at about the same rate as those from whites. The study took the bank to task for failing to adequately market to minority groups in Phoenix, as shown by the low numbers of applications State Savings received from minorities.

Marc Trimmer, State Savings' CRA officer, says the low application numbers are anomalies. The bulk of the business the bank did in 1992 (its first year of existence) and 1993 involved the refinancing of loans originally made by the Federal Housing Administration and the Veterans Administration. He says that in the last 18 months, State has added seven bilingual loan officers to help with its low-income-lending efforts. Those loan officers are paid salaries, and not by commission, so the temptation to ignore small, low-income loan-seekers is eliminated.

State Savings Bank would seem to be making an honest effort to adhere to fair-lending practices. But there are 20 other lenders in Phoenix with fair-lending problems of their own. Among the larger ones are Banc One Mortgage Corporation, Venture Financial Services and Countrywide Funding Corporation, one of the companies that first turned down Greg and Bernadette Johnson.

With so many lenders unwilling to help lower-income people get mortgages, finding one that will work with borrowers can be a difficult task. Ultimately, Thunderbird Bank's Smith says, the most important choice a lower-income house hunter makes may be the first--the realtor.

"They need to make sure they get with someone who will help them through the whole process," she says, "including which lender will be best for them.